Comprehensive Business Valuations for Informed Decisions
Business valuations are frequently requested by business owners, investors, potential buyers, and potential sellers to accurately determine a company’s worth ahead of a sale, merger/acquisition, or public offering. Several methods are used by valuation experts to ensure a precise assessment. Here are a few of the most common methods:
Market-Based Valuation
Market-based valuation relies on comparing recent selling prices of similar businesses. This method is somewhat subjective due to the ever-changing market conditions and the potential lack of a significant number of comparable businesses. Valuing a sole proprietorship using this method can be particularly challenging because shared internal information may be difficult to verify, often necessitating a separate due diligence engagement.
Asset-Based Valuation
Asset-based valuation considers the business’s total net asset value, which is the value of all its assets minus its total liabilities. There are two primary approaches within this method:
- Going Concern Approach: This approach lists the business’s net balance sheet value of its assets and subtracts the sum of its liabilities.
- Liquidation Approach: This approach determines the net cash that would be received if all assets were sold and liabilities paid off.
Income-Based Valuation
Income-based valuation assesses the business’s income-producing capacity relative to its risk to determine its value. The main techniques used in this method are capitalization and discounting. The business’s risk is determined by the discount and capitalization rates. The most common income-based valuation methods include:
- Capitalization of Earnings
- Multiple of Discretionary Earnings
- Discounted Cash Flow
Reasons for Obtaining a Valuation Report:
- Preparation for Sale of Business
- Equity Financing
- Addition of Shareholders/Co-Investors
No matter the reason, our team is here to assist you with your business valuation needs. Contact us today for expert guidance and support in determining the true value of your business.